European startups: 400 billion went up in smoke in 2022

Posted on Dec 7, 2022 at 6:31 am

Its confirmed. The European startup ecosystem has suffered a serious setback since the beginning of the year. Nearly $400 billion worth of valuations – public and private – went up in smoke in 2022, according to the annual “State of European Tech 2022” report by British venture capital fund Atomico.

After peaking at the end of 2021 ($3.1 trillion), the valuation of the European tech sector dropped to $2.7 trillion in early December 2022. Swedish fintech klarna is the perfect illustration of this after having lost 85% of its value last July to reach 6.5 billion dollars.

“The year was tough with the conflict in Ukraine, inflation, rising rates… unheard of since the 2008 financial crisis. Financial markets have changed radically,” underlines Tom Wehmeier, Atomico associate and head of research.

better than 2020

Despite this setback, 2022 will still be better than 2020, whose total value amounted to 2.160 billion dollars. It is, therefore, rather a return to normality after a year of 2021 marked by record valuations. “The foundations of the European technology ecosystem are laid. Actors are resilient,” observes Tom Wehmeier.

Funds raised by European startups are expected to reach $85 billion by the end of 2022, according to Atomico estimates. That’s 18% less than in 2021, the year startup Europe first broke the glass ceiling of 100 billion raised. “The first half of 2022 recorded records. There was clearly a paradigm shift in the second half,” says Tom Wehmeier.

It was last summer that investments in European start-ups began to fall sharply, reaching monthly levels equivalent to 2018. In the third quarter of 2022, total investment in European start-ups fell by more than 40% compared to the same period. period in 2021. However, this amount remains double that of 2020 (39 billion dollars raised).

less unicorns

The “final stage” segment broke a record in the first half of 2022 with 133 initial rounds over $100 million. However, this number should be considered with caution, as some of the mega fundraisers, such as those from Payfit, Ankorstore or even Qonto, were announced in early January 2022, but were actually closed in late 2021.

In the third quarter of 2022, “only” 35 mega fundraisers were registered in Europe. This drop is due, in part, to the exit of hedge funds such as the American Tiger Global and Coatue Management. European venture capital funds, however, have large reserves (the “dry powder” in the jargon) but have significantly slowed their investment in recent months and favor start-ups whose models are profitable or on the right track.

From the unicorn’s side, it’s a cold shower. No wonder, as 2021 was “an aberrant year”, note the report’s authors, with 105 new start-ups valued at over $1 billion. In 2022, they are just 31 at the moment, which is 6 more than in 2020, but 4 less than in 2019. The number of unicorns could fall further in the coming months, following future borrowings trading at lower known valuations. like “downrounds” . “We’re going to see more and more, which isn’t necessarily a bad thing,” said Tom Wehmeier.

resilient france

2022 is also marked by layoffs. Since the start of the year, more than 14,000 European start-up employees have lost their jobs, accounting for 7% of all tech layoffs worldwide.

“The pace of global workforce reductions accelerated in the second half of 2022. November peaked, with more than double the number of layoffs in previous months,” the study authors note. But those numbers must be put in perspective, because some companies have not communicated about workforce cuts.

Good news, however, for France, which should be the only major country to break its revenue record this year (over 14 billion in 2022, against 11.6 billion in 2021). It would thus move ahead of Germany but would always remain behind the United Kingdom, which should raise twice the funding raised by French Tech.

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